MMI v IPL [2023] WSSC 86 (19 December 2023)

IN THE SUPREME COURT OF SAMOA
MMI v IPL [2023] WSSC 86 (19 December 2023)

Case name:	MMI v IPL
Citation:	[2023] WSSC 86
Decision date:	19 December 2023
Parties:	MMI v IPL
Hearing date(s):	30 November 2023
File number(s):	MISC84/23
Jurisdiction:	CIVIL
Place of delivery:	Supreme Court of Samoa, Mulinuu
Judge(s):	Justice Niavā Mata K. Tuatagaloa
On appeal from:
Order:	The statutory demand by IPL dated 27th March 2023 remains. The application to set aside statutory demand under the International Companies Act 1988 is hereby dismissed for reasons stated.
Representation:	T Patea for the Applicant K Koria & A Yi Tan for the Respondent
Catchwords:	Statutory demand - - motion to set aside statutory demand – loan agreement
Words and phrases:
Legislation cited:	Companies Act 2001, ss. 222; 223(2); International Companies Act 1988, ss. 158(1); 158(2)(b); 159; 159(1)(d); 159(2); 159(3)(; 159(4).
Cases cited:	Heath and Whale on Insolvency (online loose leaf edn, Lexis Nexis); RSA v Tatiana Investments Co. Ltd [2017] WSSC 158 (16 November 2017).
Summary of decision:

MISC84/23

IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU

IN THE MATTER:

of the International Companies Act 1988, Sections 158 and 159(2)(a).

BETWEEN:

MMI

Applicant

A N D:

IPL

Respondent

Counsel: T Patea for the Applicant
K Koria & A Yi Tan for the Respondent

Hearing: 30 November 2023
Judgment: 19 December 2023

JUDGMENT OF TUATAGALOA J
(Application to Set-Aside Statutory Demand)

Proceedings

1. On 27 March 2023 IPL issued a Statutory Demand to MMI for the sum of US$3.5million.
2. On 27 April 2023, MMI filed a Motion to Set Aside the Statutory Demand but only served IPL (Respondent) on 22 May 2023.^[1]
3. The matter was heard on 30^th November 2023 and the Court reserved its decision. This is the decision.

Background

4. The background to these proceedings is obtained from the pleadings and affidavits filed:
   • [4.1] The statutory demand is based on a Loan Agreement dated 15 August 2021 (“the Loan”)^[2] between MMI & IPL on the following terms:
     • (a) IPL agree to loan the sum of US$3.5m to MMI (“the loan amount”),
     • (b) The repayment date of the loan amount shall be no later than 15^th August 2022 (“the repayment date”).

(c) On 16 August 2021, the loan amount of US$3.5m was wired to MMI’s designated bank account and receipt thereof was confirmed by MMI.^[3]
[4.2] MMI failed to repay the loan amount by 15 August 2022.

5. On 24 November 2022 IPL’s lawyer, Carey Olsen, issued a letter of demand to MMI requesting repayment of the loan amount by 1 December 2022.^[4] MMI did not respond nor attempt to make any repayment.
6. On 27^th March 2023 IPL issued a statutory demand and was served on the same day.^[5]
7. MMI responded by letter dated 11 April 2023 disputing the agreement as a loan agreement and owing any money to IPL. MMI asked IPL to withdraw its statutory demand.^[6]
8. On 27 April 2023, MMI filed a Motion to set aside statutory demand, the subject of these proceedings.

The Application to Set Aside Statutory Demand

9. The grounds of the application are:
   • (i) The Applicant fully denies all the allegations by the Respondent and says that they don’t owe any financial liability to the Respondent
   • (ii) The Applicant will vigorously defend the allegations.
   • (iii) The Respondent breached the terms of their confidential agreement and acted in bad faith as the motive and real purpose of their Statutory Demand notice is to unjustifiably enrich their company, after knowing full well of the purpose of the confidential agreement.
   • (iv) The Statutory Demand was frivolous, vexatious and a gross abuse of process as Statutory Demand can only be used to prove solvency.
   • (v) The Respondent refused to withdraw the Statutory Demand after the Applicant’s response dated 11^th April 2023.
10. The Applicant sought the following orders:
    • (A) To declare the Statutory Demand null and void,
    • (B) The Statutory Demand was wrongfully filed/entered against the Applicant;
    • (C) To grant indemnity costs to the Applicant;
    • (D) Matter to be determined by a full hearing; and
    • (E) For such further or other orders as the Court considers appropriate.
11. Ms Amy Hsu deposed an affidavit dated 27^th April 2023 and Mr Chih Tin deposed an affidavit dated 15^th November 2023 in support of the application to set aside.
12. The Applicant claims that the Loan Agreement was not really a loan but an arrangement to facilitate a large transfer of money without raising any red flags with the banks.^[7] In support of this argument, the Applicant through Mr Chih Tin further deposes that the loan agreement does not have any interest rates, collateral or guarantees typical of loan agreements. The problem with this argument is, the loan agreement was drafted by the Applicant.
13. Mr Chih-Tin does not dispute that the amount of US$3.5million has been transferred to his account but claims that the US$3.5million was investment gains owing by the Respondent to the Applicant.^[8]

The Respondent’s submissions

14. The Respondent, IPL opposes the application to set aside by MMI (Applicant) upon the grounds:
    • (a) The Applicant owes a debt to the Respondent pursuant to a loan agreement that was entered into on or about 15 August 2021. That despite numerous demands for payment by the Respondent, the Applicant remains unable or unwilling to repay its debt.
    • (b) The Respondent is a “creditor” of the Applicant company for the purposes of s158(2)(b) of the International Companies Act 1988 (“ICA”); and as such, is entitled to petition the Court for orders to wind up the Applicant company.
    • (c) The Court has authority to order the compulsory winding up of the Applicant company pursuant to section 158(1) of ICA.
15. The Respondent claims that MMI has neglected to pay the loan amount or to secure or compound the same to the reasonable satisfaction of IPL therefore seeks the following orders:
16. The Respondent further submits that the motion or application to set aside is out of time according to section 223(2) of the Companies Act 2001 (“CA”).
17. Mr Wei-Ta deposed an affidavit dated 17^th August 2023 in support of the Notice of Opposition.

Jurisdiction and Approach to Set Aside Statutory Demand

18. The companies involved are international companies; the relevant law is the International Companies Act 1988 (“ICA”). The application to set aside is brought pursuant to sections 158 & 159 of the ICA.
19. The proceeding before the Court is the application by MMI to set aside the statutory demand issued by IPL. IPL in opposing MMI’s application to set aside its statutory demand, as one of the orders, seeks an order for compulsory winding up of MMI pursuant to section 159(1)(d) and (2) for not being able to pay its debts.^[9]
20. A statutory demand is a formal request for payment of debt from an individual or company. Its purpose is to obtain payment of a debt or as a precursor to an application for liquidation where there is no substantial dispute.^[10]
21. Unlike the Companies Act 2001 (domestic companies), ICA does not define or specifically provide for what a statutory demand is and the powers to the Court to set aside a statutory demand. The Companies Act defines a statutory demand (section 222) to mean a demand by a creditor in respect of a debt owing.
22. The application to set aside is brought pursuant to section 158 & 159 of the ICA which are provisions to do with compulsorily winding up of an international company by the Court. Of relevance:
    • 158. Application for winding-up – (1) An international company whether or not it is being wound up voluntarily, may be wound up compulsorily by order of the Court.
    • (2) The Court may order the winding-up of an international company upon the petition of 1 or more of the following:
    • (a) the company;
    • (b) a creditor, including a contingent or prospective creditor of the company;
    • (c) a contributory of the company;
    • (d) the liquidator of the company;
    • (e) the Authority.
    • .........
    • 159. Circumstances in which company may be wound up compulsorily – (1) Subject to section 158, the Court may order that an international company be wound up if –
    • ..............
    • ..................
    • (d) the company is unable to pay its debts; or
    • ..................
    • (2) An international company is taken to be unable to pay its debts if:
    • (a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding $1000 then due has served on the company by leaving at its registered office in Samoa a demand under his or her hand or under the hand of his or her agent thereunto lawfully authorised requiring the company to pay the sum so due and the company has for 30 days thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor.”
23. Section 159(2) provides that a demand (or statutory demand) for repayment of debt owing must be served upon the debtor and the debtor within 30 days after service neglected to pay the sum due or to secure or compound for it to the reasonable satisfaction of the creditor means that the debtor is unable to pay its debts would cause for compulsory winding up by the Court.
24. It then follows in the context of section 159(2) that a statutory demand could be set aside if the debtor has paid the sum due or has provided security or has compound the debt to the reasonable satisfaction of the creditor. At present MMI has failed to comply with any of these three things within 30 days.
25. Under section 158(2) it is a requirement that a petition be filed before the Court can compulsorily wind up a company. A statutory demand is required in the context of winding up proceedings pursuant to section 159(2) of ICA. Its purpose is to provide a basis on which the debtor’s inability to pay its debt as they fall due may be proved in liquidation proceedings. A statutory demand therefore, under section 159(2) is a precursor to an application for winding up in a context where there is no substantial dispute.
26. The Court has no jurisdiction or powers to set aside a statutory demand except where a petition has been filed for compulsory winding up pursuant to section 159(2). At present, there is no such petition filed before the Court seeking for compulsory winding up of MMI.
27. Given that no petition for winding up is before the Court, the present Court therefore does not have the authority or jurisdiction to set aside the statutory demand. The application to set aside is therefore dismissed.
28. The Court cannot decide on the following issues raised, for they are issues in view of winding up a company but there is no petition for winding up before the Court and the current proceeding is not about winding up but to set aside the statutory demand. However, this Court can make the following observations:

(i) Is there a Loan Agreement? If so, is it a valid or lawful agreement?

29. There is a Loan Agreement entered into by both MMI and IPL on 15 August 2021. This loan agreement is attached to the affidavits of Ms Amy Hsu a representative of MMI and Mr Wei-Ta for IPL:
    • (a) Both parties do not dispute the existence and the terms of the Loan Agreement for US$3.5million on 15 August 2021.
    • (b) The amount of US$3.5m was transferred to the Applicant’s bank account on 16 August 2021. This is acknowledged by Mr Chih-Tin of MMI in his affidavit at paragraph [6].
    • (c) The amount of US$3.5m was to be repaid by MMI by 15 August 2022.
    • (d) No repayment has been made by MMI to date.
30. Mr Chih-Tin for MMI in his affidavit dated 15 November 2023 said the agreement is structured as a loan for the purpose of large money transfers to comply with anti-money laundering regulations. The problem with this argument is the agreement was drafted by Mr Chih Tin’s people. It is concerning the allegations by Mr Chih Tin if indeed the loan agreement was created to facilitate money laundering. If accepted, Mr Chih-Tin is implicating his participation in an illegal activity. There was no proof provided by Mr Chih Tin of the allegations he makes. At best they are only bare assertions, a desperate and incredible attempt on his part to get out of his liability under the loan agreement.
31. The allegations by Mr Chih Tin is strongly refuted by Mr Wei-Ta of IPL who maintains that there is a valid and lawful Loan Agreement.

(ii) Is there a substantial dispute as to a debt?

32. The Applicant does not dispute receiving the amount of US$3.5m but says, it is not a loan but a portion of investment gains owing to them by IPL.^[11] The loan was due on 15 August 2022, MMI never made any repayment towards the loan amount they received. On 24 November 2022, IPL lawyers issued a demand letter to MMI requesting that the loan be paid up by 1 December 2022.^[12] Despite having been given a further due date to repay, MMI never responded nor attempted to repay the loan amount. As a result, IPL issued and served a statutory demand dated 27^th March 2023^[13] to MMI. MMI had only then responded disputing the loan agreement by letter dated 11^th April 2023 and asking IPL to withdraw its statutory demand. Subsequently, on 27 April 2023 MMI filed proceedings to set aside the statutory demand by IPL.
33. The issue of a substantial dispute as to a debt is one of the core issues in relation to a petition to wind up a company pursuant to section 159 of ICA and is best left for that Court.

(iii) Is MMI unable to pay its debt?

34. Similarly, the Court cannot declare the Applicant, MMI unable to pay its debt for the reason that there is no petition for winding up before the Court and this is not winding up proceedings pursuant to sections 158 & 159 of ICA. Suffice to say there was no attempt by MMI to make any repayments or to secure the loan or compound for it to the reasonable satisfaction of IPL. The Court is also mindful of section 159 (3) & (4) of matters that must, also consider in winding up proceedings.

Conclusion

35. The statutory demand by IPL dated 27^th March 2023 remains.
36. The application to set aside statutory demand under the International Companies Act 1988 is hereby dismissed for reasons stated.

JUSTICE NIAVĀ MATA TUATAGALOA

---

^[1] Affidavit of Chiang Wei-Ta, dated 17 August 2023 at [9].
^[2] Affidavit of Jing Yea Amy Hsu, dated 27 April 2023, Annexure ‘A’.
^[3] Affidavit of Chiang Wei-Ta, dated 17 August 2023, Annexure ‘A’; Affidavit of Chih Tin, dated 15 November 2023 at [6].
^[4] Affidavit of Chiang Wei-Ta, dated 17 August 2023, Annexure ‘C”.
^[5] ibid., Annexure “D”.
^[6] Affidavit of Jing Yea Amy Hsu, dated 27 April 2023, Annexure “B”.
^[7] Affidavit of Jing Yea Amy Hsu, dated 27 April 2023 at [3], see also Affidavit of Mr Chih-Tin, dated 15 November 2023 at [8].
^[8] Affidavit of Mr Chih Tin at [5].
^[9] Statutory Demand by Infinity, dated 27^th March 2023, Annexure “D” of Affidavit of Mr Wei Ta, dated 17^th Aug 2023.
^[10] Heath and Whale on Insolvency (online loose leaf edn, Lexis Nexis) at [20.4] referred to in RSA v Tatiana Investments Co. Ltd [2017] WSSC 158 (16 November 2017) at [18 – 19].
^[11] Affidavit of Mr Chih Tin, dated 15 November 2023, at [6].
^[12] Affidavit of Chiang Wei-Ta, dated 17 August 2023, Annexure ‘A’.
^[13] ibid., Annexure “D”.